When the market interest rate on a short-term note receivable is greater than the stated rate, ________.
A) the present value of the note is greater than its stated value
B) the present value of the note is less than its face value
C) the stated value of the note is greater than its face value
D) the stated value of the note is less than its face value

Question

Quizplus · Accepted Answer

When the market interest rate is higher than the stated rate, the present value of the note is less than its face value because the note is less attractive compared to the market, leading to a discount.

When the Market Interest Rate on a Short-Term Note Receivable